Starting today, train passengers will have to deal with more than one change to the NS: not only have the holiday timetable ended, but ticket prices have also increased. On average, travelers pay 4.3% more.
How is the price of such a train ticket actually constructed? Why doesn't NS receive a subsidy? And could the VAT be removed from the train ticket?
How is the price of an NS ticket structured?
As can be seen in the image below, the major cost item of the NS is personnel: 41 percent of the train ticket goes to salaries. And that wage item is remarkable: about 19,000 people work in NS, who in their last collective agreement received a wage increase of 8.5 percent over two years.
This is followed by 'other issues' such as train maintenance and the NS app (17%) and investments (16%). 3 percent goes to energy costs and 9 percent to VAT – more on that later.
Then 14 percent for the use of the track – the management of the track is the responsibility of ProRail – and the concession fees. The latter is a sort of permit for which the NS pays the government annually. For the current concession (2015-2025) it is about 86 million euros per year.
How are NS cash flows?
This permission to be the only one allowed to use the main runway is granted to NS privately, which means that other carriers have no chance to compete. This is also under discussion, because other transport companies feel they are at a disadvantage and the EU also wants the market to be open. Recently the other carriers have lost here is a summary judgment.
Public Transport Associate Professor Wijnand Veeneman points out the pocket-sized content of whether the NS has to pay for a private permit: ‘In a tender, the market determines the amount of the bid, but currently there is nobody because there is just one party Now there are interchangeable payments between NS and the government. It could be easier.' NS is a state-owned company: the Ministry of Finance has all the shares, Infrastructure and Water Management (IenW) is the client.
According to Veeneman, this fact, but also other flows of money, lead to a cumbersome system of income and expenditure between NS, ProRail and various ministries. 'You would like the total money picture to be better managed by the government, instead of each party dealing with one flow of money.'
Why doesn't NS receive a subsidy?
The NS receives no state subsidy and at the same time pays the concession fee. A 'negative subsidy', says the NS on the basis of a report by the Dutch Consumers and Markets Authority. Revenue is made up of the sale of tickets – the student travel product of which is paid for by the Ministry of Education -, sales in station shops and trains circulating abroad.
In the Netherlands, according to Veeneman, it was once decided not to really privatize NS, because the company is owned by the government: 'It went well with NS, and it was the period when several companies were privatised. Then the NS agrees: transfer the railway lines that need the money to regional operators and provinces, so they will have it subsidy. The concession for the mainline rail network is for the NS, but it costs money.'
So the NS no longer received the subsidy and the user started paying. In better years, this could lead to profits of almost 400 million euros. But in the first corona year, NS made a loss of around 900 million.
NS does not expect to return to pre-corona level before 2026. Not because the missing travelers all return, but mainly due to population growth and sustainability considerations.
Does that system where the user pays work well?
'In countries where public transport is well organized and used, such as the Netherlands, in general the traveler often pays a relatively high percentage of the total costs and prices are kept low only for specific groups,' says Veeneman.
That system may work well in normal times, concluded the senior lecturer after research, but things can go very wrong in something as disruptive as a pandemic. 'In countries like Luxembourg, where public transport is free, empty trains due to the coronavirus weren't a problem. The government and the carriers entered into negotiations: fewer subsidies on the one hand, fewer trains on the other. In countries where the user pays, it was much more complicated.'
The Netherlands is a good example of this: here the number of passenger kilometers has halved and revenue has plummeted. In exchange for running the trains, the Dutch railways were reimbursed by the state at 93%. This year, these availability payments will be replaced by a (much lower) bridging payment.
Is it time for a new funding system?
This is the wish of the NS. He wants to eliminate two cost items: the concession fee and VAT on train tickets. A spokesperson for NS: 'We no longer find it realistic to pay that amount for a cheaper contract now that fewer people are traveling on public transport. Of business case it is no longer correct'.
The Ministry of Infrastructure and Water disagrees: 'The main rail network contract is normally a profitable contract and a concession fee is required for this. This fee goes to the Mobility Fund, which pays, among other investment in the railway.'
The NS wants to completely eliminate the VAT on train tickets, says the spokesman: 'Especially from the end of 2021, the European member states have the option of reducing the VAT on public transport to 0 percent.'
The Ministry of Infrastructure and Water Management had asked the Institute of Knowledge for Mobility Policies to investigate the effect of this provision. This showed that a VAT cut does not necessarily entice motorists out of their cars, whereas this would be one reason why IenW would grant such a wish. A spokesman: 'So there are no plans in this regard, but it is not entirely excluded.'